Permalink Submitted by Alan - IRA critic on Tue, 2022-12-20 14:30
Depends on the type of RMD. The IRS has only waived 2021 and 2022 annual LE RMDs for 10 year rule beneficiaries when the original owner passed after the RBD. All other beneficiary RMDs are still required and subject to the 50% penalty if not withdrawn, although the penalty is usually waived upon filing a 5329 and making up the late RMD.
Permalink Submitted by Alan Myers on Wed, 2022-12-21 04:50
By “waived” does that mean the IRS is not requiring an RMD from a 10-year rule beneficiary for 2021 or 2022? I just talked to a new client today whose mother passed in March 2021. She did not take a distribution in 2021. I suggested she take one now for 2022 to avoid any future problems. Does she have to go back and take one for 2021 or is that water under the bridge as far as the IRS is concerned at this point (given that it took them a year and a half to promulgate the rules). On a separate note, another client is a beneficiary of one-half of a sister’s IRA. Her sister would have been old enough to be taking RMDs. When my client inherited half of the IRA, if sister had not taken her full RMD for the year, would my client only need to take half of what was left with the other beneficiary responsible for the other half? Thanks in advance for the answers to these two questions!
Permalink Submitted by David Mertz on Wed, 2022-12-21 12:49
If the mother died after the mother’s Required Beginning Date for RMDs, a beneficiary of the mother’s IRA was required to complete any portion of the mother’s 2021 RMD that the mother had not yet completed. Only beneficiary RMDs under the 10-year rule were waived for 2021 and 2022. The mother’s year-of-death RMD (if the mother died after the mother’s RBD) was not waived.
Regarding the inherited IRA with two beneficiaries, the year-of-death RMD is required to be completed by the beneficiaries in any combination. Although IRS guidance is lacking on this issue, the beneficiary who takes their a respective ½ share of the unsatisfied portion of the RMD should be OK and the other beneficiary who did not take their ½ share should be the one with the outstanding obligation to complete the remainder of the RMD.
Permalink Submitted by Alan - IRA critic on Tue, 2022-12-20 14:30
Depends on the type of RMD. The IRS has only waived 2021 and 2022 annual LE RMDs for 10 year rule beneficiaries when the original owner passed after the RBD. All other beneficiary RMDs are still required and subject to the 50% penalty if not withdrawn, although the penalty is usually waived upon filing a 5329 and making up the late RMD.
Permalink Submitted by Alan Myers on Wed, 2022-12-21 04:50
By “waived” does that mean the IRS is not requiring an RMD from a 10-year rule beneficiary for 2021 or 2022? I just talked to a new client today whose mother passed in March 2021. She did not take a distribution in 2021. I suggested she take one now for 2022 to avoid any future problems. Does she have to go back and take one for 2021 or is that water under the bridge as far as the IRS is concerned at this point (given that it took them a year and a half to promulgate the rules). On a separate note, another client is a beneficiary of one-half of a sister’s IRA. Her sister would have been old enough to be taking RMDs. When my client inherited half of the IRA, if sister had not taken her full RMD for the year, would my client only need to take half of what was left with the other beneficiary responsible for the other half? Thanks in advance for the answers to these two questions!
Permalink Submitted by David Mertz on Wed, 2022-12-21 12:49